Britain has been bracketed with Hungary, Iceland and Spain as one of the countries most affected by the global credit crunch and falling house prices, according to the west's leading economic thinktank.

In its half-yearly health check of global growth, the Organisation for Economic Cooperation and Development said the UK economy would shrink by 1.1%.

"The downturn is expected to be severe in economies most vulnerable to the financial crisis or to sharp house price falls. These include Hungary, Iceland, Ireland, Luxembourg, Spain, Turkey and the UK," it said in its economic outlook.

The projection is similar to the 1% drop in gross domestic product predicted by Alistair Darling for 2009 in the pre-budget report. But the thinktank is more pessimistic about the prospects for 2010, when it is forecasting a modest 0.8% pick up in growth. That is about half the 1.75% rate of expansion expected by the chancellor.

The Liberal Democrat Treasury spokesman Vince Cable said: "Worryingly, the OECD is offering a more realistic assessment than Alistair Darling of how quickly the economy will recover.

The chancellor's prediction that the recession will be over in just 218 days seems wildly optimistic whilst millions struggle to pay their bills ... and businesses continue to go to the wall."

Meanwhile, in the credit markets there were growing signs of the strain put on UK government bonds.

Action by the Treasury, including this week's £21bn package of tax cuts and spending increases, means UK national debt is projected to hit 57.1% of GDP, the highest level since the 1970s.

Any investor worried that rising debt could spiral out of control and break the Treasury can pay £9,000 a year to insure £1m of UK government bonds against default. This compares with £3,000 at the end of September and £1,000 in May.

These prices suggest UK government bonds are now among the most risky in the western world - second only to Italy among the G7 group of leading industrial nations. Italy has borrowings equivalent to more than 100% of GDP.